Cranberry growers struggle for income amid oversupply
VanWychen is a third-generation cranberry grower who runs the family’s Warrens-area Wetherby Cranberry Co. 110 miles northwest of Madison with her husband, Jim. The VanWychens’ son and son-in-law also grow cranberries at their own marshes.
“I always keep on saying if Grandma has anything to do with it there’s going to be a fifth generation on this marsh,” VanWychen said. “I’m just hoping and praying that that will happen.”
But her optimism faded in December when Cliffstar, a beverage manufacturer, terminated a contract to buy the family’s cranberries — a deal that had been in force for nearly a quarter century.
With a 57 percent increase in cranberry production nationwide from 2002 to 2013 — and sales that continue to trail demand — U.S. growers such as the VanWychens are struggling to create new markets to absorb a growing oversupply of the tiny tart berries grown and harvested in marshes.
Wisconsin is at the centre of the glut. Between 2012 and 2013, Wisconsin saw a 25 percent boost in production, a record-breaking harvest of 6 million barrels of cranberries. The state produced 67 percent of all cranberries harvested in the United States in 2013, according to figures released in July.
VanWychen believes the industry must do even more to boost demand for their crop.
“One thing we learned (was) how to grow them too well,” VanWychen said. “We didn’t keep up with the marketing portion of our industry.”
The glut also has led to a widening gap in the earnings between independent growers, such as the VanWychens, and those who supply Massachusetts-based Ocean Spray. The cooperative, which dominates the industry, has been sued for allegedly deliberately driving down the cost of the commodity — a charge Ocean Spray said stems from a misunderstanding of how cooperatives operate.
According to Ocean Spray spokesperson Kellyanne Dignan, Ocean Spray pays some of its growers through sales of Ocean Spray-branded products. Those suppliers got just under $57 per 100-pound barrel on average for the 2012 crop. Other growers who sell their cranberries to Ocean Spray at the commodity price received just over $22 per barrel on average.
Independent growers are seeing significantly lower prices for their berries. They have gotten as little as $10 per 100-pound barrel — well below the cost of production.
The industry is considering some steps, including controls on how much growers can produce, to reduce the oversupply. Cranberry growers also are working to boost demand overseas as well as domestically and to convince the federal government to purchase more of the crop.
Overproduction
Growers and industry leaders have attributed the overproduction to a variety of factors.
One is the popularity of sweetened and dried cranberries — branded as Craisins by Ocean Spray — which has led some growers to plant more cranberries. Growers in Canada also have increased production. Some growers say Ocean Spray has encouraged both Ocean Spray and independent growers to plant more acres of cranberries, partly fuelling the oversupply.
Dignan cited a report from the Wisconsin State Cranberry Growers Association in 2008 that said the industry as a whole needed 5,000 additional acres to meet market demand in the next five to 10 years, which would add a projected $75 million a year to the state economy and 1,115 jobs.
But now there are too many berries. To help farmers facing oversupply, independent grower Linda Prehn of Prehn Cranberry Co. near Tomah created the United Cranberry Growers Cooperative four years ago to unite and organize independent cranberry owners who are not part of Ocean Spray.
Ocean Spray executives attribute the oversupply to growers attempting to meet demand for the fastest growing product in the industry: sweetened and dried cranberries.
“I think we’ve had a long period of success over the last decade ... because of Craisins,” said Dan Crocker, vice president of cooperative development for Ocean Spray.
Tom Lochner, executive director of the Wisconsin State Cranberry Growers Association, said the price of cranberries ebbs and flows and “with cranberries, you plant, you wait three to five years for your crop, and it takes a couple years to be ready.”
Lochner added while Ocean Spray growers are generally doing better now than independent growers, there have been years when independents did better. Ocean Spray controls 61 percent of the state’s crop, meaning “it’s not really a free market,” Prehn said, but it also extensively markets cranberries, benefiting all growers.
“(Ocean Spray) creates some headaches, but they create some opportunities,” she said.
Despite the oversupply, the cooperative’s bottom line continues to grow. In 2013, Ocean Spray had gross sales of $2.2 billion and net proceeds of $380 million, the latter up 15.5 percent from 2012. Figures for independent growers were not available.
Lochner said of the 250 cranberry growers in Wisconsin, about half are independent and half are with Ocean Spray; some have acres both in and out of the cooperative. Jim Van Wychen said the price disparity between independents and Ocean Spray growers is as wide as he has seen during 40 years in business.
Controlling supply
Due to the widening gap between supply and demand over the past decade, the Cranberry Marketing Committee, a federally chartered body, has recommended using volume control to address the glut of cranberries.
The proposal, which must be approved by U.S. Secretary of Agriculture Tom Vilsack, would restrict a grower to selling only 85 percent of a grower’s recent average sales in an effort to drive up the price. Excess berries could not be sold but could be used for other purposes, such soil enhancement.
Although some growers have expressed concerns about curbing production, Scott Soares, executive director of the marketing committee, said he expects the proposal to pass.
Said Prehn: “I think overall the volume regulation is a great tool for the industry to use, but it’s not an endgame for us. We don’t want to control our crops every year. We want to sell our crops every year. “
In January, the Ocean Spray board of directors unanimously supported the proposed cut.
“I don’t think independents were pleased with the small reduction, but it was clear that OSC (Ocean Spray) wasn’t willing to go any higher,” Ed Jesse, UW-Madison agricultural economist and former CMC member, said in an email interview. “It won’t do much to bring the industry back to a balance, but I guess it’s a start toward that goal.”
Things are also looking up for the VanWychens. They have found a new handler for most of their cranberries, Cranberries Limited, a small Wisconsin Rapids company that arranges buyers for their crop.
However, other independents without a home for their berries and limited options for distribution may have to spread them onto fields to enhance soil, something Nodji VanWychen said she “hates to see.”
Source: host.madison.com
